Financial life in a big town

The U.S. economy may be headed for its deepest and longest recession since World War II as mounting job losses take their toll on consumer confidence and spending.

Employers cut payrolls last month at the fastest pace in 34 years as the unemployment rate rose to 6.7 percent, the highest level since 1993. The 533,000 drop brought cumulative job losses this year to 1.91 million, the Labor Department said yesterday in Washington.

“Almost all businesses are in survival mode, and they’re slashing payrolls and investments just to conserve cash,” Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, said in a Bloomberg Television interview yesterday. “We’re in store for some big job losses.”

The plunge may spur incoming President Barack Obama to come up with a fiscal stimulus package larger than the $700 billion plan some economists advocate. Obama today promised to make the “single largest new investment” in roads and public buildings as part of his plan to save or create 2.5 million jobs.

Yesterday’s figures added urgency to negotiations over aid to U.S. automakers. Democrats in Congress reached an agreement in principle with the Bush administration on providing funds to prevent a collapse of General Motors Corp. and Chrysler LLC, a congressional aide said.

U.S. stocks fell for the fourth time in five weeks as the worsening job market added to concern the recession is deepening. The Standard & Poor’s 500 Index lost 2.3 percent to 876.07, trimming its rebound from the 11-year low reached on Nov. 20 to 16 percent.

Fourth-Quarter GDP

John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, said the jobs report suggests that the economy shrank at annual rate of 5 percent in the final three months of the year. That would be the biggest contraction since the first quarter of 1982.

“Consumer confidence is going to be bad,” Silvia said. “It is going to be a difficult winter for a lot of people.”

Yelena Grinberg of San Francisco is already feeling the effects of a sluggish labor market. The 26 year old has sent out more than 100 resumes since she lost her job as an administrative assistant, and has only landed one position: doing clerical work for $12 an hour over two days.

“It’s really tough,” she said, standing outside an Employment Development Department office in San Francisco. “I was so sure it wasn’t going to be hard. But no one wants to look at me,” she said, starting to cry. “I’m running out of money and I’m freaking out.”

GM, Citigroup

Job losses are likely to mount next year as the collapse in credit and slump in spending hurt companies from Citigroup Inc. to AT&T Inc. Legg Mason Inc., a Baltimore-based fund manager, said yesterday it will eliminate 8 percent of its workforce.

Payrolls in November were forecast to drop by 335,000, according to the median estimate in a Bloomberg News survey. The jobless rate was projected to rise to 6.8 percent.

Revisions for September and October increased losses by 199,000. November was the 11th consecutive drop in payrolls.

The employment slump was a key factor in determining the start of the recession online pay day loans. The National Bureau of Economic Research, the arbiter of U.S. business cycles, announced this week that a contraction began in December 2007, the month payrolls peaked.

Yearlong Recession

At 12 months, the recession is already the longest since the 16-month slump that ended in November 1982. The recession is the 11th since a downturn that occurred in 1945, the year that World War II ended.

To fight the downturn, Federal Reserve Chairman Ben S. Bernanke this week outlined unorthodox policy action that officials can take beyond lowering interest rates. One option would be to purchase longer-term Treasuries on the open market to inject more cash into the financial system.

The central bank may also cut its benchmark rate from 1 percent at its meeting Dec. 15-16 in Washington. HSBC Holdings Inc. economists yesterday forecast the Fed will reduce it to zero, emulating the Bank of Japan’s efforts to defeat deflation earlier this decade.

Factory payrolls fell 85,000, the Labor Department said. The slide would have been even worse without the return of 27,000 striking machinists at Boeing Co.

Also preventing the unemployment rate from climbing even more last month was a surge in part-time workers. The number of Americans saying they worked part-time last month due to economic reasons — either because their hours were cut or they couldn’t find full-time jobs — surged to 7.32 million, the most since records began in 1955.

Hit to Carmakers

U.S. automakers have been particularly hard hit as sales last month dropped to the lowest level in 26 years. The top executives of GM, Ford Motor Co. and Chrysler this week appealed to Congress for as much as $34 billion in government assistance.

Lawmakers who support bailing out U.S. automakers sought to rally support for a scaled-down loan program, citing the grim jobs report as evidence that bankruptcies of any of the Big Three would be disastrous for the economy.

At least some of the acceleration in job losses is the result of the tightening grip of the credit crunch, with loss- ridden banks making it harder to borrow, economists said. Policy makers’ decision in September to let investment bank Lehman Brothers Holdings Inc. fail, while saving other financial institutions, may have contributed to the crisis.

“It’s the collapse heard around the world,” said Ellen Zentner, a senior economist in New York at Bank of Tokyo- Mitsubishi UFJ Ltd., which had the closest payrolls forecast in the Bloomberg survey. “It’s probably one of the worst decisions the Fed ever made — to save everybody else but Lehman.”

Housing Slump

Financial firms decreased payrolls by 32,000 last month, after a loss of 31,000 in October. The report also reflected the housing slump, with builders eliminating 82,000 posts after a 64,000 drop the month before.

“We don’t get the job losses stopping until 2010,” Kurt Karl, chief U.S. economist at Swiss Re in New York, said in a Bloomberg Television interview.

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SIOUX FALLS, S.D. — For those putting money into solving global energy supply and demand problems, the supply side — with its towering, white wind turbines and sleek solar panels — has always been the star.

But technology that can cut demand has stolen some of the spotlight this year.

Energy efficiency, which encompasses building automation, networked smart grids and advanced lighting, represents the "here and now" of energy independence, said Kevin Landis, who manages the Firsthand Alternative Energy Fund.

"It’s absolutely, hands down, the cleanest form of energy," Landis said. "It’s not the power plant that puts out half the emissions. It’s the power plant you didn’t have to build at all."

Venture capital funding of energy efficiency companies topped $339 million in the first three quarters of 2008, already exceeding the so-called cleantech sector’s total 2007 investment, according to an Ernst & Young report based on data from Dow Jones VentureSource.

GridPoint Inc., of Arlington, Va., the biggest funding recipient, is working with utilities such as Duke Energy and Xcel Energy to give homeowners information about power consumption levels for lights, fans and appliances, said Steve Hauser, GridPoint’s head of market development. GridPoint raised $120 million in fourth-round financing for its smart grid platform.

Refrigerators are much more efficient than they were 15 years ago, but their compressors and defrosters simply cycle on and off periodically cash advance in 1 hour. GridPoint’s system, in the pilot stage in a few hundred homes across the country, makes sure those tasks occur only during cheaper, off-peak hours, Hauser said.

A homeowner also would be able to run diagnostics online and determine whether it makes economic sense to replace an old appliance.

Major corporations stand to save the most.

McDonald’s Corp., the nation’s No. 1 hamburger chain, has reduced energy use by 3.75 percent through lighting retrofits, new equipment purchases, enhanced energy tools and education. McDonald’s is in the pilot stage using power line networking technology developed by Echelon Corp., based in San Jose, Calif.

Echelon has helped companies monitor and control networks for more than 20 years, but its top executive said the industry was in its infancy.

"We’re still just scraping the surface," said Ken Oshman, Echelon’s chairman and chief executive.

McDonald’s spends about $1.5 billion a year on energy worldwide, most of it on equipment, lighting and air conditioning and heating, said Bob Langert, McDonald’s vice president of Corporate Social Responsibility.

The company is introducing fryers that cook the same amount of food while using about 40 percent less oil and consuming about 4 percent less energy than standard fryers.

McDonald’s restaurants also has developed an environmental scorecard for suppliers to assess four key measures, one of which is energy use.

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More stores are staying open 24 hours this holiday shopping season amid a softening economy, stiff competition and increasingly time-pressed consumers.

But it may not do much to boost their bottom line.

All-night hours are particularly popular with large general merchandise stores and supermarket chains, though even the upscale Bay department store will be open all night in six locations closer to Christmas Eve.

The retailers say they’re doing it to keep time-pressed customers happy while others cite economic uncertainty as the motive for extending store hours.

But few are claiming it will pump their profits or juice their sales.

Indeed, there may not be much more than goodwill in the endeavour, according to industry analyst Brian Yarbrough at Edward Jones.

"Not a lot of people shop those stores between 11 at night and 7 in the morning," Yarbrough said in an interview. On the other hand, it’s not costing the retailer much to offer the extra service, he said.

"You already have people in the stores stacking shelves, you really only need to add a person or two at the checkout, so it doesn’t cost a lot.”

Wal-Mart Canada Corp., which started the trend three years ago, is open in most locations, where permitted, for 24 hours as of yesterday.

Senior vice-president of operations Jim Thompson described it as "an unprecedented number of stores open for an unprecedented length of time."

The late-night hours are popular with young families, singles and shift workers, the company said.

"For many people, shopping is simply more convenient when the kids are in bed or you’re heading home from an off-hour job or commitment," Thompson said Free Credit Report and Score.

Wal-Mart rival Zellers said 50 of its stores would be open for 24-hour service, some as early as yesterday, while another 44 would be open until midnight.

Loblaw Cos. Ltd. also said it will be expanding its 24-hour service this year following the successful launch of all-night service in some stores for a limited period last year.

The supermarket operator said most of its Real Canadian and Loblaw Superstores will offer 24-hour shopping starting Friday, five days earlier than last year.

The retailer is also extending the hours at many of its conventional Loblaw Great Food, Loblaws and Zehrs stores, to open at 7 a.m. and close at 11 p.m. to help relieve customers’ holiday stress.

“More time is one of the greatest gifts we can give them during this busy time of year,” Inge van den Berg, Loblaw’s vice-president of public affairs, said in a statement.

Even some major shopping malls said some of their larger tenants with separate entrances off the parking lot plan to be open 24 hours closer to Christmas.

"We have to put a bit more enforcement on security during the wee hours," said Yorkdale general manager Anthony Casalanguida, noting it adds to the mall’s security costs.

But, if it helps retailers, it’s worth it, he said. "It’s a difficult economy. So, we’re trying to help out."

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DEARBORN, Mich. – Ford Motor Co. says it is considering selling Volvo Car Corp. as the struggling U.S. auto maker seeks to raise cash and weather the industry crisis.

Ford said Monday it expects its strategic review of the Swedish luxury auto maker will take several months.

The Swedish government has said it has been in talks with Volvo and with General Motors Corp.’s Saab unit following reports that the U payday loans.S. parent companies were seeking aid for their Swedish car makers.

Ford, GM and Chrysler LLC will go before Congress on Tuesday to present a proposal for $25 billion in loans to keep them afloat as sales sag.

Ford shares are up 18 cents at $2.87 in morning trading.

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